Cloud computing's potential is reflected in highflying stocks of companies actively involved. Stumbling blocks include security concerns and confusion about what the cloud really is.

Technology investors have their heads in the cloud these days.
Cloud computing, which supplies on-demand hosted services over the Internet, requires only that its clients have a computer and Internet access. It handles the functions traditionally performed by a firm's in-house hardware and software.

Psst! Mister. You wanna buy some cloud? Cloud computing that is. It is the wave of the future in the delivery of everything from computer software to media products to computer services. Market researcher The 451 Group estimates that revenue for infrastructure as a service, one of the two big categories of cloud computing will grow to $1.2 billion a year by 2013 from $200 million last year. Data storage in the cloud, the other big cloud computing segment, will see revenue climb to $1.7 billion in 2013 from $150 million in 2009, the group estimates.

Goldman Sachs analyst Sarah Friar this morning upped her rating on the Salesforce.com (CRM) to Buy from Neutral, with a target price of $102.

You may have heard about cloud computing but never knew what it was, or how it can make businesses more green and cost efficient. Cloud computing means that instead of running software applications on your computer, you run the apps in the "clouds" in cyberspace, in other words through the Internet. All your programs and files are stored on an outsourced computer network residing on remote servers. Sometimes, certain aspects of cloud computing are referred to as platform as a service [PaaS] and software as a service [SaaS]. WallStreetNewsNetwork.com has just updated a downloadable Excel database of 16 different publicly traded companies with some connection to cloud computing.

Do you use Yahoo (YHOO) mail or Google's (GOOG) gmail? Then in a small way, you are using cloud computing. In other words, you don't have an email server in your home or office, you're taking advantage of the cloud offered by Yahoo or Google. As a matter of fact, many companies, organizations, and universities have turned their email system over to gmail. If you have ever used Google Docs or Google Calendar, you have experienced another example of cloud computing. Google will be one of the major players in this field. The stock has a P/E of 26, is debt free, and has over $24 billion in cash.
Here are a dozen of the economic and green advantages of clouds:
1. Server equipment cost reduction due to elimination of the necessity of on-site servers.
2. Staffing cost savings, since there is little or no need for on-site network administration.
3. Potential for lower software licensing costs.
4. Elimination of server maintenance costs.
5. Small initial upfront investment.
6. Built-in computer disaster recovery services & back-up sites.
7. Reduction in client station costs. In other words, no need to buy new computers for staff as long as existing computers can connect to the Internet.
8. If additional staff computers need to be purchased, they can be cheap 'dumb' terminals.
9. Clouds provide scalability; can easily grow as the company grows.
10. The ease of the sharing of resources.
11. Services can be automated.
12. Speed of access of data.

As for disadvantages, the one major concern is security of the data. So it is a matter of which is more trustworthy, your own company or a company that specialized in data security. Another option is the utilization of cloud computing within a large corporation. Everything stays 'in-house'.

One major company in this currently narrow industry is Salesforce.com (CRM), a provider of customer-relationship management services. They have been promoting 'the end of software'. Salesforce doesn't just market to the small and medium size-companies, they have major users of their services, including Corporate Express division of Staples (SPLS), Daiwa Securities, Expedia (EXPE), Dow Jones Newswires subsidiary of News Corp. (NWSA), SunTrust Banks (STI), and Kaiser Permanente. Salesforce has a very high P/E ratio of 117, a small amount of debt amounting to about $18 million, with almost $445 million in cash.

To access a free Excel spreadsheet database of many companies which are involved in cloud computing that can be sorted, added to, and changed, go to wsnn.com.
Disclosure: Author does not own any of the above.